HEADQUARTERS: Solana Beach, CA
YEAR FOUNDED: 2015
2015 REVENUE: Undisclosed
Somewhere between Somalia and Yemen in 2012, Aeron Sullivan, a Marine captain of the 3rd Assault Amphibian Battalion, was aboard the U.S.S. New Orleans thinking about the war on drugs.
His battalion floated around North Africa to stop Somali pirates from running drugs to terrorist groups like al Qaeda and ISIS. The "Big Easy" would spot the pirates, detain them, and seize the assets, mostly opium and munitions. With cooperation from regional governments, the pirates would be sent to prison and the drugs would be destroyed.
But Sullivan knew that another crew of pirates would quickly replace the last--and he also knew that the men were not motivated by religion or a yearning to destroy America, but rather the opportunity to make money and provide for their families. It made him think of his uncles, two men with families who grew marijuana in Humboldt County, California. Society might label them criminals. But in Sullivan's worldview, his uncles were good guys, American farmers growing weed in the fertile foothills of Northern California.
"What I realized growing up is that these people bleed like you and I do, they want to provide for their children like you and I do," Sullivan says. "They aren't trying to destabilize the justice system in the United States."
After his deployment was over, Sullivan headed back to his base in California and found that the legal cannabis industry was taking off in Colorado. That got him thinking: Why not find a normal, constructive, professional way to sell pot? The distribution of cannabis was still stuck in the old street-dealer folkways of pot brokers, burner cell phones, and sketchy handoffs of drugs and cash.
Two years later, after completing an MBA online, Sullivan quit the Marines. One day later, in April 2015, he flew to Boulder, Colorado, to join the CanopyBoulder accelerator and work on his weed-tech startup named Tradiv. There, Sullivan and co-founder Geoff Doran began building what he hopes will become the "Amazon of the marijuana industry," an online wholesale marketplace where licensed marijuana businesses can buy and sell product with the click of a button.
Just over a year later, Tradiv has raised $3.4 million in venture capital from Anslinger Capital, CanopyBoulder, Poseidon Asset Management, and Tech Coast Angels. The platform has hosted tens of millions of dollars in legal marijuana sales, and has more than 230 pot growers and retailers as members. Tradiv is set to launch in Oregon's recreational marijuana market by October and plans a beta launch in California before year's end.
Tradiv went live in Colorado this past October with nine companies buying and selling $40,000 worth of product over the first month. By the end of November, Tradiv had facilitated $560,000 worth of transactions and completely sold out of its inventory. By December, the company had $4.5 million worth of product (that's about 1,100 pounds of pot) and 70 companies on its site. By April, the numbers had grown to more than two metric tons (4,409.2 pounds) of cannabis and 230 buyers and sellers.
The way Tradiv makes money is similar to how Amazon does, by charging its third-party vendors per transaction. Tradiv charges 4 to 10 percent per transaction. The average one, Sullivan says, is around $15,000, with a low end of $400 and a high of $150,000, depending on the time of the year. Tradiv is free to use for dispensaries.
For those who do not know much about the wholesale marijuana market, Tradiv replaces a daisy chain of relationships, phone calls, and meet-ups. After a harvest, a grower has to find a buyer quickly. Most growers have built a network of relationships over the years and will start sending texts, emails, or Facebook messages to find a buyer. Or, pot brokers will find buyers and take a cut. But as the marijuana industry matures and dispensaries turn into well-oiled business ventures, the players need a central marketplace like an Amazon or Alibaba. And that's where Tradiv comes in, along with competitors like Leaflink.
"The broker system is how weed has been traded since the 1930s," Sullivan says. "It works well with illegal markets to minimize contacts between growers, distributors, and retailers, but it's not good for a scaling business."
When a dispensary places an order, the grower packages the product and one of Tradiv's couriers--it works with Green Parcel Service and Blue Line Protection Group, though it's hoping to develop its own transportation service--will pick up the order and drop it off in one to three days.
Tradiv cannot currently accept online payments, but that is not unique to the company. Banking is a big problem in the marijuana industry; the majority of buyers pay cash on delivery or by check. Tradiv is in the process of partnering with Hypur, a software system that audits marijuana companies to help persuade banks to accept high volumes of cash from the industry. At some point, Tradiv hopes to facilitate online payments.
Another pain point that Tradiv seeks to solve is pricing volatility. The price per pound of marijuana can fluctuate 50 percent, quarter to quarter, according to data. Typically, in the fall, the market drops for three months--possibly because Colorado's tourism slows between summer and winter, and all outdoor plants are harvested, creating a glut. But Sullivan says Tradiv's algorithm will be able to help growers and retailers sell and buy product for the best price possible.
"We blended distribution with a commodity-type system and variable pricing to help businesses work with volatility," Sullivan says. "We will follow the price of marijuana and help you buy and sell your products during peaks of the market to avoid highs and lows and at the end of the year."
Tradiv has partnered with Flowhub, a plant management and sales POS software system that helps dispensaries stay compliant under state law, to bring state-wide data on what products are selling and which products are duds. Tradiv plans to use the data to build products to alert wholesale managers about popular products, so dispensary owners will not have to guess. Mike Leibowitz, owner of boutique wholesale grower Carrick Harvest in Denver, says Tradiv is helping the market pin down the "economics of what a specific strain costs."
With its technology, Tradiv is adding stability and "a regiment of legitimacy" to marijuana, Leibowitz says. "The platform is helping us format, organize, and streamline the industry."